NVMI, PLAB, UCTT: Needham Sees Better Days For Equip’t Stocks

By Tiernan Ray

Needham & Co.’s Y. Edwin Mok this morning cut his estimate for semiconductor capital equipment spending estimates this year and next, and cut numbers for several equipment makers, though he thinks the Street is a little too negative on the industry and that shares could rally come the fall.

The industry’s big trade show, Semicon West, is next week, hence there’s been a rise in activity among analysts in recent days to try and scope out the shape of the rest of this year for the equipment makers. Semicon will probably “feed the bear case” against the stocks, Mok thinks.

Mok cut his estimate for semi capital spending to $56.3 billion from a prior $59.2 billion for this year, and cut his 2012 estimate to $56.9 billion from a prior $61.1 billion. That would be a 1% rise in spending in 2012, better than the Street’s dour projection for a decline of 10% to 20%.

The third quarter will be a problem, but a rebound may come in Q4, Mok thinks.

Major order push-outs by Samsung (SSNLF) and Taiwan Semiconductor Manufacturing (TSM) have led equipment makers to expect that equipment orders dropped in Q2 by 10% to 25%, Mok writes. But some bad news probably still has to come out in Q3, he thinks, and he expects equipment makers will forecast sales in Q3 to be flat with Q2, but that they could be down as much as 10%. That Street is expecting a decline of just 2.3%, and could end up being disappointed.

“We are more cautious on 3Q11 orders and revenue outlook. While some of the pushed-out orders have returned, such as a portion of Samsung’s NAND order, we believe TSMC has put its Fab 14 expansion on hold.”

On the individual names, Mok trimmed his Applied Materials revenue estimate this fiscal year ending October to $10.95 billion from a prior $11 billion, and $10.8 billion next year, down from a prior $10.96 billion. He also cut revenue and EPS estimates for Lam Research (LRCX), Mattson Technology (MTSN), Novellus Systems (NVLS), Nova Measuring Instruments (NVMI), Ultra Clean Holdings (UCTT), and Varian Semiconductor (VSEA).

Mok recommends NVMI with a Strong Buy, and UCTT and Photronics (PLAB) with Buy ratings.

The group is largely up this morning, with NVMI up 71 cents, or 7%, at $11.24; UCTT up 18 cents, or almost 2%, at $9.82, and PLAB up 32 cents, or almost 4%, at $8.52.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.